How to manage and prevent rent arrears as a Landlord: A comprehensive guide

Falling into rent arrears isn’t a pleasant experience for anyone. For both tenants and landlords, these sorts of financial worries can be incredibly distressing.

As a landlord, you assume that after signing the contract, rent payments will continue to come in on a regular basis, providing a consistent stream of income to meet your ongoing costs. Any interruption to this cycle can prove very problematic.

However, it’s important to pull back the curtain and understand the many possible reasons behind why rent arrears may occur. Once the reasons have been identified, work closely with your tenants to manage the unfortunate situation and prevent it happening again.

1. Develop a positive relationship with your tenants
2. Protect yourself with loss of rent insurance
3. Keep a record of payments
4. Take a pragmatic approach
5. Contact the tenants guarantor
6. If all else fails – serve a section 8 notice

Develop a positive relationship with your tenants

One of the simplest, yet most effective, ways to avoid rent arrears is good communication with your tenants. Fostering a relationship built around trust and mutual respect allows the tenant to feel valued, meaning that they’re much more likely to prioritise rent payments above other expenses.

While coming across as friendly and approachable is important, you must also make sure that professional boundaries are set and maintained. This will allow the tenant to feel comfortable discussing any financial problems with you, but also prevents you from being taken advantage of.

Ensuring that your tenant’s needs are met will go a long way toward building a positive relationship. Make sure that repairs or complaints are dealt with quickly and effectively, and that the tenant is kept in the loop throughout the whole process. Full transparency, especially when it comes to repairs or works that need to or are being completed on the property, are the best way to build patience and trust.

Failing to develop a positive relationship with your tenant could set you up for disaster from the start. Tenants are people and they’re much less likely to want to cooperate with a landlord that they dislike, or that they feel is exploiting them. This means that rent moves down the priority list, potentially leading to missed or irregular payments.

protect yourself with loss of rent insurance

In some situations, rent arrears may be unavoidable. But significant financial losses aren’t.

By investing in the right insurance policy for you and your property, you can prepare for the worst-case scenarios and minimise any potential losses. Landlord insurance, also known as buy-to-let insurance, provides protection from financial losses, whether it’s following damage to your property or furnishings, loss of rent when tenants have to move due to damage to the property, or making sure that you’re supported if rent arrears occur.

Preparation is key and by not investing in the correct insurance, you risk leaving yourself financially vulnerable. There are plenty of options which cover a wide range of risks, so make sure that you take the time to look into which is best for you and get a quote from a specialist landlord insurance provider.

keep a record of all payments

Regardless of what kind of business you run, good organisation is paramount to financial success and stability. The same is true of renting properties, and keeping precise records of all payments, in and out, will really help in the event of any difficult situations.

Ideally, rent payments will be automated through bank transfer to either you directly, or a letting agent. This allows for a clear, dated record of all payments which can be referred to at any time. It also means that rent payments will be scheduled and easily trackable each week or month.

As well as keeping records of all payments, it’s also a good idea to keep track of each time you’ve contacted a tenant and what they were contacted about. This gives you a clearer picture of who you need to keep an eye on and what issues they may be facing.

By allowing your records to become disorganised, you risk missed payments slipping through the cracks. Keeping organised and on top of your incoming payments allows you to catch any irregularities or missed payments right away, allowing you to fix the problem before it escalates and the debt builds up.

take a pragmatic approach

Tenants are human beings and it’s important to remember that falling into rent arrears isn’t a personal choice. When these things happen, remain calm and contact your tenant right away. 

Usually, there will be a valid explanation for why this has happened, whether it’s an administrative error or a problem with the bank that’s out of the tenant’s control. While bothersome, these sorts of things are easily resolvable and, most of the time, won’t lead to any further issues.

Sometimes, though, things may be a bit more serious. Again, it’s essential to contact your tenant as quickly as possible to get the best understanding of what’s going on and what can be done to resolve the problem. This may be something as simple as working together to construct a payment plan over a longer time period to ensure the debt is repaid in a more manageable way, which may be especially helpful if your tenant has run into some financial difficulties. Just remember that regardless of the situation, there is always a resolution that can work for both you and your tenant, so it’s important to remain professional and, if necessary, seek advice from the relevant governing body.

Having a pragmatic approach to negative situations like these will benefit you in a number of ways — from maintaining a positive relationship with your tenants, to simply ensuring that problems are resolved and don’t spiral out of control.

contact the tenants guarantor

Guarantors exist for exactly this kind of situation, so don’t be afraid to contact them if necessary. Unfortunately, there will be some times where communication with the tenant is unsuccessful or breaks down entirely. If this happens, the guarantor is there as a means to resolve things.

When contacting a guarantor, remember to remain calm and professional. Clearly explain the situation and the steps that have been taken up to this point. Be sure to reference how and when the tenant has been contacted, as well as the outcome of each conversation. It’s important that both you and the guarantor are on the same page so a resolution can be found.

Most importantly, inform and don’t threaten. You want to make sure that you’re not coming across as aggressive or unreasonable, however stressful an ordeal this may have been. Maintaining professionalism throughout will go a long way in ensuring that the guarantor is on your side and will help you work to find a resolution to the problem at hand. In some cases, this may mean that the guarantor pays what’s owed, they act as a representative to set up a payment plan, or you work together to find another solution.

if all reasonable approaches fail -you can eventually serve a section 8 notice

So, you’ve contacted the tenant and you’ve attempted to find a pragmatic solution. You’ve also contacted the guarantor and it’s all been for naught. Worry not, though, as there’s a legal means for this nightmare to be resolved.

A section 8 notice is a way to legally evict your tenant if they’ve broken the terms of the tenancy as outlined in your rent agreement. Following the serving of this notice, the tenant will have a set period of time to vacate the property. This notice period would usually be two months but, due to the COVID-19 pandemic, it has been extended. If you served your tenant their notice between 29 August 2020 and 31 May 2021, the notice period must be 6 months. But, if you gave your tenant notice on or after 1 June 2021, the notice period must be at least 4 months.

Obtaining a section 8 notice can be done by filling in the relevant paperwork and specifying which terms of the tenancy have been violated. You’ll then need to inform the tenant of the notice period during which they will need to leave. If this doesn’t happen by the specified date, you can apply for a possession order.

Of course, this type of action should only really be taken as a last resort in the case that all other avenues have been exhausted. Don’t let unforeseen events jeopardise your business’s future. Secure it with the right business insurance from Brisco Business.

Darragh Timlin

With over 25 years’ experience, Darragh is an expert in all things insurance. Starting his career in commercial property underwriting, Darragh has worked for a number of global insurers and is now Managing Director of Brisco Business, part of the wider Henry Seymour Group.

All articles by Darragh Timlin